How much salary should you pay yourself if you own your own medical practice?
Jun 25, 2020
One of the most rewarding accomplishments for a medical professional is to open and operate your own private practice. As an owner, you can make decisions that reflect on your values and the quality of service you work hard to provide. You have the freedom to set your schedule as you like it and to even manage a staff of employees you trust to represent your vision. However, starting your own practice can be expensive and comes with a lot of risks.
One of the questions many people starting their own practice ask is how much they should set aside for their own salary every month. The answer to this question varies on your specialty and how successful your practice is once open.
Setting your salary when you own your own practice
On average, it costs between $70,000 and $100,000 to start your own private practice. These startup costs cover:
- Fees for registering your business
- Malpractice insurance
- Office space
- Renovations
- Equipment and supplies
- Marketing and sales
- Taxes and more
Typically, business startup funds should include enough to cover at least three to six months of your salary. This is a good principle to apply to your practice. Your practice will likely take a little time to get off the ground and running. This will require a lot of hard work and dedication from you, and it is good to know that your living expenses will be covered for at least a few months before your start earning enough to generate regular income.
Once you start earning income, you essentially have two methods for paying yourself: setting a regular salary or drawing from your earnings.
When you set a regular salary, you pay yourself a set amount bi-weekly or monthly as you would with any other employee. With the draw method, you draw money directly from your business earnings as you need it. This method is a bit more flexible but requires a lot of careful planning and responsibility to successfully manage. A salary is easier to manage and can also be registered for automatic tax deductions. Most practices use a combination of both methods since the IRS requires you pay yourself a competitive salary and many retirement benefits are based on your salary and not your draws.
By considering which combination is most beneficial for you and the type of practice you want to run, you should have a plan in place before opening your practice.
Start your own medical practice with the help of a ProVise financial advisor
Are you one of the many health care professionals who dream of owning their own practice so you can help people get the treatment you believe they deserve? The risks of starting a practice can make it seem daunting to pursue, but it can ultimately be the most rewarding experience in your career. Our CERTIFIED FINANCIAL PLANNER™ professionals at ProVise Management Group are here to help you achieve your dream of owning your own practice.
We will work closely with you to assess your current financial circumstances, short-term and long-term goals, personal values and risk tolerance. We use all of this information to draft a financial plan that helps you reach your goal of owning and operating a private practice.
Every plan we create is personalized to the needs and goals of each client, and we create a plan for you at a fiduciary standard of care. We also offer an unconditional money-back guarantee if you are unhappy with your written plan. Simply return it to us and we will refund 100% of the fee paid.
Are you ready to take your medical career to the next level and start your own private practice? Talk to one of our team members today about forming your financial strategy as a practice owner. Contact ProVise today to schedule a complimentary consultation.